The QACA match is the Basic Match that provides a match of 100% up to the first 1% and 50% of the next 5% contributed (max match of 3.5%). However, the Annual Notice states that "No matching contribution will be made on any deferral contributions that exceed 3% of Compensation in the first and second years, 4% in the third year, 5% in the fourth year, and 6% in the fifth and subsequent years." The match limit described here seems consistent with the match that would be associated with the automatic enrollment step-up feature as described in the paragraph above (i.e. the max match would be 2% of Pay for the first and second Plan year where a participant was enrolled at 3% of their Pay).
The question I have is if someone made an affirmative election to defer 6% of their Pay during their first year of participation, based on the match described above, would they be entitled to a 3.5% match or just a 2% Match? The research I've done seems to indicate it would be 3.5%. However, it's our client's understanding that the maximum exposure the Sponsor has for the match for the 2008 and 2009 Plan Year is 2% of Pay, and then this increases .50% for each additional year thereafter (for a cap of 3.5%). They base this on the sentence that I described in quotes in the paragraph above. I can't find anything that says their understanding is wrong, but based on what I've researched, this only applies to those that are automatically enrolled; everyone else that makes an affirmative election would be eligible for the entire match of up to 3.5%. Can someone please clarify this for me?
Edited by Kevin01, 19 November 2009 - 08:37 AM.